Nestlé (Ireland) Pension Fund and the Nestlé European Pension Fund Pension Changes - proposals Andrew R White Head of Group Pensions UK & Ireland 28 February 2012
Nestlé (Ireland) Pension Fund and the Nestlé European Pension Fund Pension Changes - proposals
Andrew R White Head of Group Pensions UK & Ireland
28 February 2012
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Today
• Presentation for pensioner and deferred members: – Why is change essential?
– What are the proposed changes?
– How do they affect you?
– What happens now?
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Really important information -
• If you are a pensioner, your pension will continue to be paid at the same time each month
• The pension will also increase each year in the same way as it does now
• If you are a deferred pensioner, your pension at retirement will be calculated in exactly the same way as it now
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• Nestlé is committed to providing quality pension benefits for our members and employees in Ireland
• We want to provide pension benefits that are sustainable for the long-term
• We want to protect the benefits that members have built up in the past
• For our current employees we will continue to offer a defined benefit option for current and new employees, but on a new career average basis
• We believe that these proposals will set us apart from most other companies. Nestlé is committed to providing great pensions
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Background
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What do we have now?
• Nestlé (Ireland) Pension Fund • 791 members
– 104 active members – 251 deferred pensioners – 436 pensioners
• About €61m of assets • Significant deficit • Final-salary design
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Why is change essential • The future economic outlook remains really tough • The cost of providing the Company’s current pension
arrangements, which are on a final-salary basis, are significant and rising: 5
People are living longer
Lower investment returns in the future
Increased volume of legislation and regulation
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Why is change essential?
• In a final-salary scheme the Company is responsible for making sure that the Fund has enough money
• Company takes on the ‘risk’ of providing these types of pension arrangements
• To ensure our pensions are sustainable for the long term the risks and costs of providing these pensions need to be shared
• As a result of all of these issues the Company has conducted a review of its pension arrangements both here in Ireland and in the UK
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What is changing? • Key changes will affect current and future active members
only – the Company will provide employees with new options for building up future pension (move from final salary to Career Average pension)
• Protect pensions that have already been built up – all members
• These changes are planned to be effective from 1 April 2012
• Proposal to transfer all the assets and pensions from the current Fund to a Nestlé pan-European pension arrangement based in Belgium at the same date
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Nestlé European Pension Fund • As part of changes, the Company has put a proposal to the
Trustee to transfer the assets of the current Fund to an existing Nestlé pan-European pension arrangement based in Belgium – the Nestlé European Pension Fund
• This will allow Nestlé to consolidate / operate pension arrangements for several European countries within one pension arrangement
• More flexibility, more cost-effective, so helping ensure the long-term sustainability of our pension arrangements
• A new Irish Section will be created inside the Nestlé European Pension Fund.
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Nestlé European Pension Fund
• When the transfer of assets takes place, the Company will make a significant additional payment to the new arrangement to ensure that the new Irish section is fully funded on a Belgian funding basis.
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Financial health checks
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• Valuations determine whether there is enough money to pay for all the past benefits that have built up.
• The Actuary compares the assets in the Fund with the value of all the past pension benefits (liabilities)
• Nestlé is responsible for paying contributions required to pay for any deficit that exists in relation to benefits earned in the past.
= deficit in the Fund
Assets
Pensions
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Nestlé European Pension Fund • This will provide greater financial security for all members
and will allow the Board of the Nestlé European Pension Fund to start permitting early retirements from the Irish Section.
• The new Irish section will remain subject to Irish tax legislation
• Current administrative arrangements will not change.
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Who will be affected? • All members’ benefits (actives, pensioners and deferreds)
will be held by / paid from the Nestlé European Pension Fund from April 2012 onwards.
• Pensioners and deferred members will NOT be affected by any of the changes to future benefit design – these will only affect current and future active members of the Fund.
• Pensioners will continue to have their pension paid in the same way as at present
• The pension payable to deferred members will be calculated on the same basis as at present
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What happens now? • You recently received a letter dated 10 February outlining
the proposal • Company and Trustee will consider any formal written
feedback received from members up to 9th March • Company and Trustee will write to all members to provide
details of the feedback received and inform them of the outcome of their deliberations and confirm the actual transfer date
• Assets and liabilities (pension benefits) of the Nestlé (Ireland) Pension Fund will transfer to the Nestlé European Pension Fund on the transfer date
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Questions and Answers